Bitcoin and the crypto industry are sitting in the eye of a storm. The first cryptocurrency by market cap has been attracting attention from regulators and politicians as more people jump into the crypto space.
This has led to a subtle push between the U.S. top market regulators, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC). SEC Chair Gary Gensler wants to take on more authority to regulate the crypto market.
Former Goldman Sachs executive Raoul Pal commented on a recent speech given by Gensler, also a former employee of this banking giant. Pal believes the SEC Chair is “laying down the hardest case” to try to classify most cryptocurrencies as securities and regulate them.
Currently, only Bitcoin and Ethereum have a clear classification as commodities in the U.S., but even this has been contested under Gensler’s leadership. In that sense, Pal compared the current situation of the crypto industry with the beginnings of the internet.
At that time, the former Goldman Sachs executive said, authorities tried to imposed rules and laws to take more control of the emerging sector. In time they failed, and allowed innovation to generate one of the most important events in financial markets for the U.S. Pal said:
That decision led to trillions of dollars of new capital creation and the largest investment inflows into the US in history. The innovation that was seeded from light touch regulation of the internet changed the world, with the US as leader.
Thus, the former Goldman Sachs executives claimed that future regulation for Bitcoin and cryptocurrencies will be “much lighter than today”. The crypto industry is one of the fastest-growing in the world reaching an all-time high market cap of around $2 trillion.
Why The SEC Could Change Is Rules To Favor Bitcoin And Crypto
If the SEC Chair and politicians in the U.S. exercise a heavier hand on the crypto market, the companies that rely on Bitcoin and digital assets to operate might op out of the country. This could lead to a capital exit equally or larger than when the internet emerged.
Pal also highlighted that the industry is growing in political power. Across 2021, the space has seen many former public employees taking positions in crypto exchanges and other companies in this industry.
The above will made regulators and political actors could create a new regulatory framework that will reduce its execution cost, be more efficient, and be fair for the people looking to enter the crypto market. Pal said:
(…) that also means the frankly ridiculous rules around Accredited Investors or selling securities HAS to change to meet the modern world, not the 1930’s world. It is simply inexcusable to allow rich people to get richer and penalising the poorer people who aren’t accredited.
In support of his arguments, Pal said that the current political context will make it very hard for regulators to stopped people from investing in Bitcoin and cryptocurrencies. However, everything will be decided in the next 3 to 5 years.
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In that period, countries with a lighter and a friendly approach to cryptocurrencies and Bitcoin will be the biggest winners. The SEC Chair could be using a “classic negotiation” tactic by starting his mandate with a tough approach to later “compromised”, Pal added.
At the time of writing, Bitcoin (BTC) trades at $42,700 with sideways movement in the daily chart.